The voice of the energy industry

Roadmap to 2020 and vision to 2030 – priority questions for the new Government

There has been a lot of reaction on the implications of the General Election result for the energy industry. However the Conservative manifesto suggested that not much will change post-election in terms of energy policy. There are a number of key short term decisions which the new Government needs to provide early clarity on and a long term vision needed for an investable framework.

Short term – the roadmap to 2020.

Significant investment is still required for the UK to meet its 2020 renewable energy target. There are already concerns about whether there is sufficient funding left in the Levy Control Framework (LCF) given that wholesale prices are lower than expected, with spend on Feed in Tariff and the Renewable Obligation is higher than predicted by DECC. The new Government’s pledge to end new subsidy for onshore wind further complicates the picture, given that it is one of the lowest cost renewable technologies. The new Government now needs to set out how it intends to meet the 2020 EU renewables target without busting the LCF.

Long term – post 2020. 

The vision to 2030 and beyond is vital yet currently unclear. What will be the ambition for renewables post 2020? This may be driven in part by European developments on the governance of the new 2030 EU renewable target. That would be impacted by the outcome of the UK’s in/out referendum. The Conservative Party manifesto talked about significant expansion of new nuclear but as of yet there is no clarity on the LCF post 2020, which would need to be significantly increased to accommodate such a programme.

As for gas-fired generation, its role will be determined by the level of a carbon intensity target out to 2030. Whilst we are not expecting a 2030 decarbonisation target for power to be set, there will be an outcome from the Paris Climate Change negotiations at the end of the year and the UK’s fifth carbon budget will also need to be agreed. Under an ambitious scenario anything more than a peaking role for gas-fired generation (which itself would probably require capacity payments) would likely require Carbon Capture and Storage (or at least be CCS ready). However, that in turn will require significant investment post 2030 alongside nuclear if it is to feature as part of the mix.

For now.

Over the coming weeks and months Energy UK will continue working constructively with Government to set out the long term vision and clarity that is required to enable the long term infrastructure investments as part of the transition to a low carbon future.

 

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